US v. Walters, 88 CR 709.
| Decision Date | 11 October 1991 |
| Docket Number | No. 88 CR 709.,88 CR 709. |
| Citation | 775 F. Supp. 1173 |
| Parties | UNITED STATES of America, Plaintiff, v. Norby WALTERS, Defendant. |
| Court | U.S. District Court — Northern District of Illinois |
Robert Gold, New York City, Tyrone C. Fahner, Mayer, Brown & Platt, Chicago, Ill., for defendant.
Howard Pearl, U.S. Atty., Chicago, Ill., for plaintiff.
Defendant, Norby Walters ("Walters"), was charged in a seven-count indictment with Racketeering, Racketeering Conspiracy, Mail Fraud, and Conspiracy. On April 13, 1989, in a trial before Judge Marovich of this court, a jury convicted Walters and co-defendant, Lloyd Bloom ("Bloom"), on six counts, including two counts of mail fraud. On September 17, 1990, the Seventh Circuit Court of Appeals reversed all the convictions and remanded the case for a new trial on the ground that it had been an error to refuse to instruct the jury on the advice defendants received from counsel. 913 F.2d 388. Bloom subsequently requested assignment to Judge Marovich pursuant to General Rule 44(a). The case was therefore bifurcated for trial, and Walters is before this court on remand.
Defendant now moves to dismiss the indictment, arguing that the evidence presented by the government during his first trial ("Walters I") is insufficient to support a guilty verdict on the mail fraud counts.1 Defendant's motion raises several questions concerning the scope of the federal mail fraud statute, 18 U.S.C. § 1341. After careful examination, the court denies defendant's motion to dismiss the indictment.
Facts and Procedural History.
According to the indictment, Walters and Bloom, operating as World Sports and Entertainment, Inc. ("WSE"), approached a number of college football players and persuaded them to sign representation agreements ("agreements"). Walters and Bloom presented themselves as experienced agents who could assist the athletes in post-collegiate contract negotiations with National Football League franchise organizations. According to the indictment, Walters and Bloom offered each player a "signing bonus," which was increased if an athlete appeared reluctant to sign. Inducements offered by Walters and Bloom included: "large amounts of cash; monthly wire transfers of funds; interest-free loans; automobiles; clothing; concert and airline tickets; trips to New York City; hotel accommodations; use of limousines; trips to major entertainment events; introduction to prominent entertainers; cash payments and other benefits for family members; and insurance policies." Superseding Indictment Count I, ¶ 14.
A major source of some players' reluctance was the fact that the National Collegiate Athletic Association ("NCAA"), the Mid-American Athletic Conference and the InterCollegiate Big Ten Conference ("Big Ten") (collectively referred to as the "Associations") had regulations which strictly governed the amateur status of athletes who played for member colleges. Essentially, these regulations provided that a student-athlete was ineligible to participate in intercollegiate athletics if that athlete:
NCAA rules and regulations provided for a limit on the number of athletic scholarships which a school could offer each year in any particular sport. In Division I-A football, each school was permitted to award up to 30 athletic scholarships per year. The rules further provided that a college could have no more than 95 scholarships in effect each year in any particular sport.
In order to implement these regulations, the Associations required the athletes to submit eligibility statements ("statements") to the colleges certifying that they had complied with the regulations. The statements were then forwarded to the Associations. The regulations provided that any athlete who knowingly submitted false or misleading information to his college regarding his compliance with the regulations was ineligible to compete in intercollegiate athletics or to receive an athletic scholarship.
In order to persuade the players to sign, Walters and Bloom allegedly devised a scheme to prevent the disclosure of the agreements. First, Bloom and Walters told each player that WSE's copy of the agreement would be kept hidden in an office safe. Second, in the event that the agreement was discovered, it was post-dated until after the player's eligibility had expired.
The indictment alleges that on a number of occasions defendants' practice of signing players to the agreements resulted in the submission of false information to both the colleges and the Associations. After signing representation agreements, a number of players provided statements to their colleges certifying that they were eligible to play intercollegiate football. These representations were false, since the players' eligibility terminated upon the execution of the agreements. The indictment further alleges that the submission of false information deprived the schools of both scholarship funds and the right to allocate a limited number of scholarships among eligible athletes.
Where a defendant moves to dismiss an indictment, the court is "not concerned with the truth or falsity of any factual allegation ... instead the issue is whether the facts as alleged constitute violations of the relevant statute." U.S. v. Lytle, 677 F.Supp. 1370, 1374 n. 8 (N.D.Ill.1988); See also U.S. v. Sampson, 371 U.S. 75, 78-79, 83 S.Ct. 173, 174-75, 9 L.Ed.2d 136 (1962).
Defendant Walters moves the court to dismiss the indictment on three grounds: first, the government has failed to allege a violation of the mail fraud statute; second, the evidence is insufficient to prove that defendant knew about the false representations made by the athletes to the colleges; and third, the mails were not used "in furtherance of" the alleged scheme.2
Defendant challenges the indictment on the ground that it does not charge him with an offense under the mail fraud statute. The federal mail fraud statute provides in relevant part that "whoever, having devised or intending to devise any scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses ... for the purpose of executing such scheme or artifice ... places in any post office ... any matter or thing whatever ... shall be fined not more than $1000 or imprisoned not more than five years, or both." 18 U.S.C. § 1341. Defendant maintains that the indictment does not properly allege that the scheme was "devised ... for obtaining money or property." 18 U.S.C. § 1341.
Defendant advances two analytically distinct arguments. First, defendant contends that the mail fraud statute, as interpreted by the United States Supreme Court in McNally v. U.S., 483 U.S. 350, 356, 107 S.Ct. 2875, 2879, 97 L.Ed.2d 292 (1987), only applies where the "affirmative goal" of a scheme is to obtain money or property through fraud. According to defendant, the scheme alleged was not affirmatively designed to deprive the colleges of scholarship funds. Defendant maintains that, at most, his conduct only incidentally effected such a deprivation.
Second, defendant argues that the colleges did not suffer a deprivation of property or money as a result of his activity, because the scholarship money would have been paid to the players even in the absence of the alleged scheme.
Contrary to defendant's earnest assertions, the Supreme Court's decision in McNally does not fully resolve these two questions. It does, however, provide some guidance in evaluating the merits of defendant's arguments. The court will, therefore, briefly examine the McNally decision.
McNally involved a mail fraud prosecution of two Commonwealth of Kentucky officials. The relevant portion of the indictment charged the defendants with a scheme "to defraud the citizens and government of Kentucky of their right to have the Commonwealth's affairs conducted honestly...." McNally, 483 U.S. at 353, 107 S.Ct. at 2878. At trial, the jury was not told that in order to convict they had to find that the Commonwealth of Kentucky had actually been defrauded of money or property. Both defendants were convicted on the mail fraud counts. On appeal, the petitioners argued that the mail fraud convictions were invalid because the jury did not find that the scheme was devised to obtain money or property.
The United States Supreme Court agreed. Although the statute was drafted in the disjunctive, the court held that its legislative history and traditional application required that it be read in the conjunctive. In order for an indictment to stand under 18 U.S.C. § 1341, the offense charged must involve a scheme that was devised to defraud and to obtain money or property by false or fraudulent pretenses. As the court stated, "rather than construe the statute in a manner that leaves its outer boundaries ambiguous ... we read § 1341 as limited in scope to the protection of property rights." McNally, 483 U.S. at 360, 107 S.Ct. at 2882.
Following the Supreme Court's decision in McNally, a number of courts had the opportunity to address the applicability of the mail fraud statute in cases where the offense charged involved a non-economic deprivation. Many of these cases were post-McNally challenges to indictments or convictions which had been handed-up or entered before the McNally decision was issued. Invariably, the...
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